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The Great Airwaves… Giveaway?

FCC Airwaves Giveaway

In the early 90s, we fought hard against the advent of high bid auction of commercial airwaves. (See USIMTA/USIPCA Lobbying History & Airwaves Auction Winner) We argued at the FCC and before Congress repeatedly, until we were hoarse and blue in the face, that auctions of communications spectrum, like cellular phone and wireless broadband frequencies would stiffle competition and freeze out the several thousand small independent “wildcatters,” whom we represented … and who we were, as well.

But we always assumed that once an auction mechanism replaced the lotteries of construction permits (ie, FCC licenses) that the airwaves would in fact be sold to the big players.

But alas, since 1993 when spectrum auctions were mandated by Congress, the US Govt. has quietly given away well over a half trillion dollars in spectrum (90% of all licensing, in fact!) that was supposed to be auctioned to the highest bidder. A 2007 study demonstrates that the lotteries that were occuring prior to 1993 were much more honest and transparent.   Well duuhh.

“The third rail of spectrum policy is the rotten, special interest politics that has driven lawmakers to give away the public’s airwaves to private interests without public compensation. In the vast stream of government reports seeking to reform spectrum policy since 1993, one looks in vain for more than a token acknowledgement, let alone a serious and sustained discussion, of this giveaway.”

The Art of Spectrum Lobbying

America’s $480 Billion Spectrum Giveaway:

How it Happened, and How to Prevent it from Recurring

Source: J.H. Snider, New America Foundation

Full Report: The Art of Spectrum Lobbying (PDF, 62 pp.)

In the late 1980s, the Federal Communications Commission (FCC) conducted a series of lotteries to allocate electromagnetic spectrum (popularly known as the “public airwaves”) for mobile telephone service. More than 320,000 lottery tickets were acquired by spectrum speculators, including dentists, lawyers, accountants, and anyone else willing to devote the time and hire the legal talent necessary to fill out the complicated form to acquire a lottery ticket. Many of the lottery tickets were purchased as part of partnerships, whose members would collectively enter lottery tickets for hundreds of different licenses. For example, in December 1989, the FCC selected the winning ticket for a lottery for one such license on Cape Cod, Massachusetts. The winning ticket holder then sold the ticket ten months later for $41.5 million. Former Governor Mark Warner, a U.S. Senate staffer before the lottery, was among the politically savvy who made millions by acquiring and flipping the licenses granted in the lottery.

FCC Airwaves Lotteries and Auctions

The result was widespread outrage because the public could readily perceive that billions of dollars of public assets had been given away to private interests—well-connected, wealthy Americans—without public compensation. As the chairman of the FCC at the time characterized the lottery winners, “They receive a windfall and the public gets no payment.” This outrage led to legislation in 1993 to auction future FCC licenses. Congressional leaders publicly promised that, except for a few services—notably public safety and terrestrial broadcasting—the government would henceforth grant exclusive rights to use spectrum only in return for monetary compensation.

This has not come to pass. According to calculations presented in this paper, since 1993, the government has given to private interests as much as $480 billion in spectrum usage rights without public compensation. That comes to more than 90 percent of the value of spectrum usage rights it has assigned from 1993 through the present.

In addition, the government has warehoused as much as $155 billion of spectrum usage rights in guard bands. The warehousing in itself is not a giveaway to private interests. But, for reasons we shall see, it may position incumbent licensees to acquire the warehoused spectrum without public compensation. Thus, the act of guard band warehousing may be viewed as part of a multi step process that leads to giveaways just like winning a presidential primary election is necessary to winning the presidential general election. For example, since 1997 TV broadcasters have used the digital transition to acquire more than $6 billion worth of guard band spectrum by winning rights to transmit programming across a larger geographic area.

How did this happen? How could the government give away so much in public assets to private interests without public and congressional outrage? A large part of the answer is that the government no longer gives away spectrum usage rights in highly visible ways such as spectrum lotteries. Instead, incumbent licensees and spectrum speculators have perfected strategies that enable them to acquire free spectrum rights below the public radar. Until public policies are implemented to render those low visibility lobbying strategies ineffective—so that spectrum giveaways are once again as visible as they were in the days of spectrum lotteries—spectrum giveaways to private entities will persist. (Of course, when the FCC or Congress grants spectrum to public entities or for unlicensed use, no giveaway in this sense is involved because the public retains full rights to its airwaves.)

This paper deals with what might be considered the third rail of spectrum policy: the rotten, special interest politics that has driven lawmakers to give away the public’s airwaves to private interests without public compensation. In the vast stream of government reports seeking to reform spectrum policy since 1993, one looks in vain for more than a token acknowledgement, let alone a serious and sustained discussion, of this giveaway. Like other politically embarrassing issues, it is an issue that congressional leaders and their proxies—the FCC, GAO, CBO, NTIA, and others—would prefer not to talk about. This, of course, suits the beneficiaries of the giveaway and their army of lobbyists and analysts just fine. For that very reason alone, however, it is an issue that desperately needs a public airing.

This paper is divided into three sections: Part I provides an estimate of the value of the government’s spectrum rights giveaway since 1993, Part II provides a description of the strategies spectrum lobbyists have used to acquire such rights, and Part III provides policy recommendations to ensure that spectrum rights giveaways (which are closely linked to warehousing guard band spectrum) come to an end.

To view the full paper, open the PDF file linked below. The working paper version, which was published in July, is also attached.

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The Art of Spectrum Lobbying (PDF, 62 pp.)

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lynnea2 The BoardLynnea Bylund is a Director of Gandhi Worldwide Education Institute, founder of Catalyst House and has nearly three decades of experience in administration, marketing and business development. She was a nationally recognized spokeswoman for the emerging alternative video and information delivery industries. She has a degree in holistic health-nutrition from the legendary and controversial health educator and activist Dr. Kurt Donsbach, she is the founder of two not-for-profit small business-based wireless trade associations and has lobbied on Capitol Hill and at the FCC where she has spoken out strongly against the cable TV monopoly, illegal spectrum warehousing and ill-conceived congressional schemes to auction our nation’s precious airwaves to the highest bidder.

Ms. Bylund is a founder and former CEO of a Washington DC telecommunications consulting and management company with holdings in several operating and developmental wireless communications systems and companies. In 1995 Lynnea became the first female in the world to be awarded a Broadband PCS operating permit – she was one of only 17 winners, along with Sprint, AT&T, and Verizon in the biggest cash auction in world history, raising a whopping $8 billion. Lynnea also spear-headed the successful effort to launch the first cable TV network in the South Pacific islands.
… > Follow Lynnea on:  +LynneaBylund – Twitter – LinkedIn – FaceBook – Pinterest & YouTube

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